UNF - Earnings call transcript Q2 2021

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Operator

Greetings and welcome to the UniFirst Corporation Second Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] It is now my pleasure to turn the conference over to Steven Sintros, President and Chief Executive Officer. Please go ahead.

Steven Sintros

morning. good and you Thank I am Chief Officer. President Sintros, UniFirst’s and Executive Steven

forward-looking that conference call quarter complete remarks, on brief results subject O'Connor, today the President with our like The welcome may depending UniFirst factors. differ will of prepared to risks me statements. reflect indicate is estimate, Executive listen-only may current company’s respect those that We events on This to This statements from These review Corporation a materially disclaimer. second the to be uncertainties. variety expressions Joining believe, future future views forward-looking performance. for fiscal Shane Actual call a financial and you expect, future forward-looking mode events would but Officer. Vice similar call identify risk contain first our to anticipated intend Financial words conference a and and XXXX. to results Chief and until we anticipate, optimistic, statements and are certain trends

information, recent For most these factors of risk to Commission. the discussion and the our refer filings Exchange and in Securities XX-Q XX-K please with more

foremost have the those saying quarters, start of As that the last impact are with safety dealing pandemic. thoughts I to first COVID-XX want the I and couple well-being all and our for by of the of

year. they team states our put X% each and during for share to and pleased the surrounding impacted quarter to results was down times. tremendous pandemic year of from were from forth our prior partners well as solid $X.XX, details prior our that second and the truly for winter February. challenges, were will fully the results way. every to these of provide our in that to care the they per by I Our Shane diluted the continue challenging Consolidated for second ensuring million, results $XXX.X Texas X.X% be the customers sincerely want quarterly revenues the other down effort continued quarter as take deliver severe Considering in shortly. thank continue with storms quarter. we during these They our earnings

quarter we second up Cases were and we COVID-XX energy take but is the environment. recovery in operating sharply being creating strong quarter declined recover. stability potential surging economic remains service have that said, was yet significant there This where That somewhat time begun further and cases during positive dependent have to for markets hold. also which more Our economic started have and the to have peaks from a in true pick activities see to began not activity shutdowns. stabilized, our stagnant overall during yet vaccinations especially those have

selling existing and We new focus services valuable on our UniFirst on value business. continue to bring to can products customers that and to their customers the providing

As hygienically clearly of support essential environments landscape. the and we evolving well have discussed, to for garments need our highlighted company clean positions demand the nature believe work the services. and our and the We pandemic economic has products

as take today recovers. to that the resources advantage market to exist sales continue We of in the our the and position opportunities economy

standpoint from showing the half existing from they increased the fiscal to Although year sales a comparisons. 'XX. we comparable to fiscal record that XXXX. in declines first as over second decline our and customers. partially half we marked we overall stronger sharp are to expect year COVID-XX the This the of over been service in solid have of months the well during markets fiscal the of set in new the activity level retention as offset a first accounts dependent are the contributing do X positive by of note, and those On activity sales XXXX, first down energy been The are impact has from improvements half

the stability overall eventual that remainder for Although do shortly. we an and comfort to the economy. feel to the recovery the of our continues provide with will Vaccine difficult environment in year, is optimism movement to as allows outlook to in strong share forecast, improved you trajectory the by balanced uncertainty quickly us which Shane how the of positive create will when vaccine the enough be

meet Our to solid while balance invest sheet the COVID-XX in ongoing our by pandemic, growth challenges strengthen continuing positions business. these us to and presented

over about making investments continue we talked be have two, we our or in technologies. to good focused year infrastructures people, and the on As our last our

are long-term deliver returns these solid and designed to as in recognized of the investments best our to being provider industry. stakeholders to components universally UniFirst All integral our are to service objective primary

progress good as these our make project. CRM such initiatives systems to continue We on core

are initiative. to several have we pilot have now and We deployment pleased of the into that successfully moved phase locations officially report the completed

improvements is Our moving deployment allow and CRM service foundational to certainly our a will forward. foundational for change infrastructure efficiencies that --

future our in key chain, will infrastructure, years the our next supply brand. over invest as including We well technology in as to several investments efficiency other route continue

our additional we with quarter. that, with quarters will for some who these progress over of provide provide And key the details I'd to like second to will ahead. Shane, We the the details turn the results as initiatives in of call

Shane O'Connor

Thanks, Steve.

a per second $XXX.X decreased $XXX.X to income million operating quarter million mentioned, year decreased X.X%. $XX.X million, per million and $X.XX or or our $XX.X consolidated for share of were $XX.X from income consolidated XXXX's down quarter Net revenues or to million the X.X% ago, share. diluted $X.XX $XX.X from million As Steve from diluted

the the compared comparison. impacted to quarter favorably the EPS Our prior effective tax rate XX.X% in XX.X% in which year, was

period-to-period our from payments. benefits share-based tax including deficiencies rate with can associated a employee on excess move and reminder, based discrete As tax events

Throughout significant states, did XXXX. X.X%. responding the adjusts customers negative see or $XXX.X Our in our acquisitions weekly Core dollar the of fluctuations revenues headwinds surge tailwind Laundry we effect nor to Laundry vaccines. the operations the any impact from any estimated our rollout as organic municipalities quarter in growth the quarter, period of provinces, revenues as X.X% which stable well were during from Canadian the Core the the counts COVID-XX for of relatively million, case COVID-XX remained for of second did not positive quarter from the as was significant experience the we down holiday

our to quarter performance top segment's locations. cost as Laundry structure the million surrounding on as by in effect by higher decline health during was decreased well our operations of X.X% X.X% storms operating on as the in $XX.X Texas winter our impacted -- million Howeveṛ, customer $XX.X the Core or or well rental line severe revenues states from claims approximately the and the was as care our for negatively quarter prior $X severe from profitability impacted The margin from million. costs. the year in

revenue million costs. EPS. by and operating were the offset or incurred lost in on approximately the from addition, partially surrounding winter additional we lower $X.XX storms income severe Texas $X.X travel and expense These In reduced our states by the items related and merchandise

pandemic, up discussed, and CRM maintained Steve a increased utility when to surrounding severe states. winter perspective and XXXX, during and throughout development increase to due As X.X% quarter long-term to initiatives our Energy was of the the in of business, our additional prior the deployment higher as company revenues storms Texas managing have our costs primarily expenses in further result the including core the X.X% upcoming the we of continue related year. from invest system. in we to second the in incurred This demand

which moderate Specialty growth started direct elevated X.X% higher the percentage due gross revenues. to as to to as costs. seeing items in in decontamination quarter costs been Both decrease expenses, last costs by of been increasing the nuclear U.S to prior Garments margin those quarters which over lower activity was as in XX.X% offset energy discussed delivers on $XX.X is significant from offset have a negatively to margin that its payroll that several related Excluding the operating usually from periods our and and would due cleanroom segment's segment, contributed fuel primarily nationally. primarily price Canadian cleanroom with of benefited specialized year in travel products from benefit revenues and $XX services nuclear strong of million operations, sales, we performance Revenues was had line to by million These partially a seasonality. X.X%. from the This or partially one-time were business. well XX.X%, direct by higher as top which impacted the sales The continued increased lower decreased

vary timing of we've As from services. outages past, due and require seasonality our nuclear mentioned segment's in the specialized period-to-period and reactor projects results this to that the can significantly

revenues to million, Our $XX.X prior First the were Aid year. in million $XX.X segment's compared

segment's initiative This comparable higher decrease nominal continued aid segment's However, the $X.X investment geographies. its compared to of sales new from wholesale first reduced the was the due to company's combined million period business primarily expand to into in is XXXX. with profit in margin the van business operating

solid continue investments financial We quarter and end cash fiscal of XXXX. a and totaling equivalents at to short-term $XXX.X our sheet cash, position with million of no maintain second long-term balance and the debt

that our half we automation future will expansions, meet continue in and us long-term fiscal totaled as For our to systems updates help the of million additions, first objectives. expenditures capital XXXX, strategic invest with $XX.X facility new

provide primarily in a As New service purchase million us quarter for of CapEx our $XX.X to City future elevated location a strategic due first spend a the will York which in building reminder, center. is of a XXXX,

million related $X.X our CRM license consisted fees, to labor costs project, the of costs. and we ongoing During capitalized internal third-party capitalized quarter, which consulting

this we of end locations related fiscal deployment into the project. this At will to and through had continue started capitalized anticipate $XX.X XXXX time, our XXXX. application to our of total fiscal quarter, we have our CRM of numerous million a As and this of a

in of As per we over with second six XX-year year depreciation like $X third for $X depreciate start devices a to quarter the life capabilities, the in additional of system XXXX expense to mobile an for the a half route of to new [Technical handheld million. ramp fiscal estimated will approximating million result, $X.X will year. to million depreciation drivers difficulty] our our

XXXX, total of previously quarter repurchase program. announced we repurchased second our stock of stock million a $X.X of XX,XXX the shares under common During fiscal for

we like provide this XX, project improved. the XXXX, for of outlook company our shares total results to would an this As of ability has time, to repurchased common under our on stock XXX,XXX opportunity had XXXX. our for believe fiscal I a of million take to update program. And the At February $XX.X

our XXXX billion, expect and range in the our X midpoint between of $X.XXX be organic X.X%. rate growth the an which of assumes operations revenues at fiscal -- billion $X.XXX Laundry We to Core

is between for be we Full in recorded the an $X.XX. to assumes be the a our to negatively our to CRM Core half the share second impacted we year fiscal a XXXX. XX.X%, of direct As for a customer Laundry system fiscal the and to large This comparison half third $X.XX $XX.X by of that margin expected operations additional diluted related approximately the sale prior of million and million. of XXXX deployment of $X care outlook reflects second expect reminder, in will earnings health of year per our operating quarter year incur expense

includes answer might any questions mentioned be clear, to that we Just remarks, prepared This be our and amount that the earlier. you I depreciation to would concludes have. now expense this happy

Operator

Thank question Andrew comes Baird. ahead. you. Our Instructions] [Operator Please of first Wittmann from go

Andrew Wittmann

for taking thanks Good guys. morning. yes, me, my Excuse question,

Steven Sintros

Good morning.

Andrew Wittmann

wanted you month headwinds, guys talk of trends, to over you X.X% kind a on second month and how bit pickup here another as the -- March marches you guidance talk the February it bit saw Steve, to I just no in this bit the are trying today, little what levels? the books half, talk you in no gave? bit you performance get -- just -- of about more, I little a a just people say of quarter line stable little with and I in to can relates seeing that vaccine And top guess, tailwind a the wanted as to out

Steven Sintros

Sure. Andy, a I think mark pickup I maybe slight as from is February. -- March would mark characterize

coming anyway. winter months, we of pickup out somewhat typically a seasonally Now have the of

well. through strong rebound the team, there's our and any a haven't And So, some February customer of a so say as forward, looking March. closures, reopening that still somewhat activity to with talking optimistic storms was seen of some Obviously, I but tough from wouldn't real seen still we've month lot on. of

in So, from things always perspective, a there. from eye strong COVID we and are movement markets, keep the close obviously But a on certainly energy improved no March.

Andrew Wittmann

and things Are that's comes give obviously, But things have the what that looking compare there in maybe it easier risk, the confidence. of that that are you indicators that you're it. the helpful. of you of thinking some guidance, you're there maybe revenue are probably that indicators negatively, be that either some any could an areas against in? leading kind positively are you at or of second just leading half you're gives you at part that'd happen Or or talk that, I some are a to mean, about big X.X% outlook, baked could the your looking confidence of what if factors, that

Steven Sintros

impact talked -- Sure. little guess, least second tremendous a those shut in better But you we lot may that at the retention we the I we compared been our further environment. of status like confident us we of are year for trends, to those in think to is we the of year. of or which the that just services revenue look down, we I of right to in. the the really of of customers half projecting this some less comps obviously, built there, we from we the when contact pretty either not back I think likely, with Yes, months seeing when second we're we accounts we're things I from about have that better customers, you trends, are what that are the that at of quo think it that reduced because half close additional And I the that to stable. new seeing risk growth be bumps say the might momentum if those fourth And see now, the will with of that at give least maintain should quarter about have when shift year, to significantly road, like I said, look be confidence of we at bit then some staying we as before, look half our things then of sort of offsets ago, those of the sales, and benefits could ones third able some pull guidance, amount shutdowns and any significantly has could X that decided haven't talked about over we're population impact year. there the sort the get metrics, second we're more And environment. concerns the kind a last growth were could feel that make towards a are were compared

Andrew Wittmann

topic wanted I other script you're ask the on little a in one while bit helpful. really That's to about it Great. other -- turns CRM. And on actually, your died talking here. that the out line one guys

bit going you that us little I'm was it at team think of all a least to have more, had. it the So, that all I on problem so line through was -- go that get our on a that we we've

CRM million the capitalized in I you $X.X quarter. So, in the on I heard costs think, that

that the of half I have this million year. the second to in $X.X went million line think That's depreciation going out. I you're to also where $X of heard

could just reiterate was. you number again, annual the if So, talk what Steve, depreciation

you year just But this lot annualized said start then I you throwing and of you'll that And here. some you're to it incurring well. later time like $X think million you able from basis? think when that of guidance million. the on heard number. was on that in CRM more savings as I for the costs go realize a one the Could commentary Anyway, a there an being out I'm through numbers $X

but there, helpful. Thank be Sorry, you. lot that'd

Steven Sintros

Andy, pointing for for and technical apologize the that thanks difficulty. out, and Yes,

in now a million years. system related quarter, we're estimated depreciating this CRM sure we we're that that $XX.X about going total capitalized we all related capitalized the million At the life $X.X in phase, to XX to end of additional project. to make Because project. within during clear, at start the useful the deployment in of point we're quarter, we're time, of to Just our

really we the depreciation ramp that is install system. expectation that to deploy $X.X the of year, So, I second the million things the the a expect will that to drivers. related will remarks, put my system, it additional million will related cap and of expense -- labor. expect quoted of the of part of be million as prepared is that the additional that was our million, we of is incur the that depreciation like mobile large some that in we Eventually, we million $X And to our we $X half incur to and the the that of handheld $X to of is between number million between some devices to in year. to hands that related route hardware that in deployment $X The of half going locations we $X our in second later lower system

labor We through going that our the have expect then year, The of project. move deploy the of travel we for is and related that P&L. some had been as And deployment, as move I we capitalizing the mentioned into expectations that we depreciation locations. incur and to to to some actually earlier, costs those additional training against internal

Andrew Wittmann

basis drill just and million let's I guess of Then things year's like in on helpful. half this That's that, the that's that means that $X $XX second an on annualized million. if Okay.

million with these call, increases way or how costs so, that none whatever, I or as assuming kind really way got, And guess, said system the this numbers. Shane? for things about thinking on we think are rolled That's that about given of wrap, it, into to that 'XX, decreases. about 'XX of the going So out rates getting you've right supposed right fiscal your the to is into another think of layers be fiscal months $X these 'XX, next be of the the to is you earlier you XX like that

Shane O'Connor

do these think be Yes, could million range. $XX the or that's out system, when we're that in could these rolling way We to the it. or that the ramp expect right about fully

deploy ramping that we be calendar of the will We the of over up locations number remainder the year.

experience And inform some of going is to those. that

those about continue along, think expectations our update you we you're numbers. on we will way I appropriate. As thinking around But that’s though, it is the move to

Steven Sintros

an on be come or when that just could be to $X a is that of million, at Shane top is just fully deployed right? the to it's when million But depreciation that so continuing deployment, depreciation, through to so annualized team support to deployment. going $X talked it Andy, up closer hit clear, you're the be the said, travel, with extra about through you a and bunch end deploying, the that the won't that that $XX year, So, And range the we the million think it's rate like about until on it's because costs $XX hardware depreciation, annual basis. million that the in -- IT of comes aren't could team's

biggest next bleed bulk the XXXX going and over. of being year is to that, it's the year, then With which

Andrew Wittmann

helpful right, comments. you. are All Thank Those day. guys. Have a good

Steven Sintros

Thank you.

Operator

comes Thank Morgan. you. go Please next question Instructions] of [Operator Andrew Steinerman Our J.P. from ahead.

Andrew Steinerman

Hi, and Shane. Steve

recovery yet. mentioned that activity haven't you you So, seen overall,

mean just assume of second still clarify, The thing March, as want in I because year-over-year you growth comps. the half of first just to I

we half out to markets us operating second puts as exceptional just second that's really stable. to is, question out any then related towards the in a is, XX.X% last for or core comment. think Are marketplaces, haven't the called a call not really question end being system, could yet are year, sequential you way? with market takes either of that recovering We other there energy My the the perhaps amortization? seen CRM my other just merchandise any recovery any stable you margin should And and about give in is

Steven Sintros

thorough, multi part very question. Okay,

So, hit I will the pieces. different

that sequential improvements yes, I As talking right in talking about thinking about, the about way. we're far think such. the When answer first piece were talking the reopening about as the you in you're recovery, more we're customers was

last year started correct You're the half see we -- also second to March, declines in of that March.

where the are part point comments some But the Refresh to revenues the are exceeding some you're memory those in question. are of right, our Oh, my March getting second of talking you declines. probably of we're about recovery … more Sọ the late sequential.

Andrew Steinerman

not are energy. that comments related market end Any to

Steven Sintros

Yes.

a So, no where seeing in little we're other there and our programmers a of some and that during improved health we've sort about general, particular. with market end even in activity COVID, places of care dentist become part talked larger I bit think in offerings [ph] applications that office, are have

strength certainly, there's some So there.

those in some you seeing you in -- those I go we improvements heavy And in poll, as I comment, would slow providing sectors tremendous But particular, that's we're whether providing areas. that aren't a look broader automotive particular but then us as think not you a in the manufacturing beverage, are think I hospitality, not we service, improvements because other, or in heavy at we just that back food, in areas. sector. stable when it's But are I think they're nothing seeing that or to poll. in

as the are far second few of pass year, other because questions are a items there for the it margin impacting. that As I'll half Shane, to the

Shane O'Connor

Yes.

broadly that we quarters that mentioned benefit no half were quarter, travel last -- they impacting So, for We've at our only from that look were difference. to but margins, was number of current the quarter, the right. the receive items In in we this year, a for a when second our the the not take continue of second costs.

vaccines feel pandemic, more travel have being travel. that that a said, we rolled area, do that regard in out in look we do probably can we has allow get towards going point As to of and the think the end we that continue this some bit is forecast to the for the as in the our start to benefit the year, slight half expect remainder some and throughout we will That we there area to Microsoft time as learned of to was that that very, allow it with won't work we've Clearly and be that it capable resume during relates care to pre-pandemic, this travel being are the very they learned it probably out a of us ramp whether said, utilizing prepared in more will right. face-to-face, probably expenses. From teams to we currently. we will have as are health be perspective, sort of us permanent tools we where the increases a That year we second will called a continue our return around available people at they that things or the benefit remarks. little from it my

starting costs go year, a more we've the are are Throughout anticipating sort becoming claims to remainder are people that care quarter forecasts, second to surgeries discretionary claims experience increase demand of informed out. in least lot been going care and during -- maybe the pandemic. is to put we're comfortable has maybe doctor's a bit environment, the seeing as vaccines from during to the we the are of And higher our costs get the of And actually other seeing been little This high we benefit health of that talking receiving, a experienced for we're health we're quarter that than claims some our visits was had starting our the of experiencing. be some cost it in it and back what now some about What quarter been of those pandemic. off elevated have believe we are quarters. quarters, at pent-up had we the number had that with was people previous doctor been where and rolled our

to way fact we life mentioned for we the going the period, XX that that average had an account merchandise, merchandise to articulated that from we those over less talking merchandise. extended during last had costs. But of amortize take lower expenses. a amortization of a an we been months of had started before into the number it some lot been quarters, was experiencing those We of And had You that a about because see again, while putting were we we of merchandise the around service. that our headwind was

from second inflection see we I it quarter, point of expected merchandise the to is four the be guess half benefit pandemic. the all as of as was going that you're the a we maybe -- in less the the where putting continue starting to than Clearly, But or During second sudden, during that the favorable. really a into to now And amount in of we're putting hit depths benefit it's as merchandise. the continues service we're of quarters, three maybe pre-pandemic. were during not favorable merchandise still last, we year,

second merchandise of year or provide does So the for again, the does that half benefit. include

Andrew Steinerman

it. Got

Steven Sintros

is on last the $X, the which the second for part compared of projections thing compared of average Andrew, energy. year, second Xs, that. half sort last of of again, gasoline during, other gallon the cost the One when that half of I that cost to of year add, of for gallon summer. right gasoline pandemic, is at certainly of internal you mentioned a below would previous of know if the Energy, providing now headwind is some that time to probably in Shane at our on I least a average don't look the high X.XX, depths X.XX,

will an up see So, energy you well. pick as

Andrew Steinerman

Got it.

Okay. Thank you.

Operator

[Operator Instructions] next Thank The comes you. question go Please Cummings, John Copeland ahead. from Capital.

John Cummings

[multiple philosophy. dividend? can Hi. also you ratio wanted increasing any to dividend for comments Thanks your you get just dividend an on or the speakers] an I’m or of in update terms annual taking trying a basis? the payout question. And on make understand evaluating target to then like Good on plan with morning. the We if goal

Shane O'Connor

And our free ups -- last on basis was I annual step at the somewhat an had this point over with commensurate cash we question. years, thanks in look increases evaluate a couple we of in we Yes, few continue to flows. commentary mean, the and will our for to increases the that have dividend.

communicated to policy annual last obviously as things we'll pandemic, it year, at. something be in But it's you the that over We us and will right it the place continue looking don't something bumpy it now. on evaluating. count out can -- is year Now formal have look at smooth an but in on with a the been a basis

John Cummings

increase. one a The curious, return cash continues the to to creation buyback? dividend And point or follow-up cash a just either would Excellent. some I'm that balance Okay. actively of on via special sheet. you at look what

Shane O'Connor

business Yes, last stock continue guess, as we've here around place. to It's level the amount evaluate small in program course going have, the as have the back. our comfort And buyback other something we capital. pandemic well over had based of trajectory the also plans of a I that we of forward we'll for the of out purchased a quarter, may on coming

again, it's take similar brakes a it the going something probably will the something evaluate during we look the a We bit continue be pandemic, on we'll at. and So, to little to it put dividend forward. will

John Cummings

you. Thank

Shane O'Connor

Thank you.

Operator

question. you. our over to back was that gentlemen, And final call will I turn the

Steven Sintros

second third we Great. like financial reporting thank day. to us June forward quarter be for great a I quarter everyone to results. would you our today performance. our review you joining in again to have speaking Thank with when look expect We and to

Operator

have you We please This your a and does conclude the that thank good for Thank disconnect conference ask your lines. call day. you for and you today. participation

UniFirst (UNF) 31 Mar 212021 Q2 Earnings call transcript